Seriti Resources to conclude acquisition of South32 coal assets in South Africa
Coal mining company Seriti Resources confirms that all conditions precedent to its acquisition of South32 SA Coal Holdings Proprietary Limited (SAEC) have been fulfilled, and the sale is expected to be completed on 1 June 2021. The new shareholders of 100% of SAEC will be Seriti Resources (90%), and the SAEC Employee and Community Trusts (5% each).
Since signing in November 2019, this transaction has been subject to various conditions precedent that have required, amongst others, the approval of the Competition Tribunal, the Minister of Mineral Resources and Energy, Richards Bay Coal Terminal and Eskom.
Mike Teke, the CEO oF Seriti said, “The closure of this transaction is a significant milestone for Seriti and our employee and community trusts. It will secure a sustainable, reliable and cost-effective coal supply solution to Eskom, and at the same time bring opportunities for further synergies and optimisation within Seriti. This is a further demonstration of our commitment to South Africa and to the industry.”
Mr Teke acknowledged the support of South32 and Eskom in achieving the fulfilment of conditions to the transaction, noting particularly the provision by South32 of a facility of up to $50 million to fund the restructure of loss-making mining areas. South32 will provide $200 million over 10 years to fund SAEC’s historic environmental rehabilitation and closure liabilities. South32 will also adjust the upfront payment to a nominal amount and forgo the deferred consideration previously envisaged under the announced sale agreements.
Eskom and Seriti have also agreed to a number of proposals to improve the long-term, sustainable and cost-effective supply of coal to Eskom, including commitments for continued supply from the Kriel and New Largo mines. Seriti will also make infrastructure available to facilitate supply to Eskom’s power stations.
Eskom has agreed to amend the existing terms and conditions stipulated in the Duhva Coal Supply Agreement, which is currently loss-making, adjusting the coal price to R550 per ton with effect from 1 June 2021, with an annual escalation (from 1 January 2022) in line with the Producer Price Index. The agreement will run until 31 December 2024.
Seriti will be engaging with employees and unions, with community structures, with the regulator and municipal officials in the coming weeks leading up to the closure of the transaction.